trending Market Intelligence /marketintelligence/en/news-insights/trending/-FpbPttT66pZdJKfgtNFlw2 content esgSubNav
In This List

XL Group discusses acquisition expense ratio, insurance/reinsurance split


Perspectives from China: The Shifting Regulatory Landscape


Anticipate the Unknown: Does Supply Chain Disruption Lead to Increased Credit Risk?


Data Stories: Data insights to help alleviate business complexity amid geopolitical risks


Street Talk | Episode 90: Banks should not wait on the Fed to put cash to work

XL Group discusses acquisition expense ratio, insurance/reinsurance split

provided guidance onthe insurance acquisition expense ratio and the split between insurance and reinsurancefor net earned premium.

CEO MichaelMcGavick said during an April 27 earningscall that the company's results for the quarter were impacted by some one-off andunique items, particularly in insurance, including higher acquisition costs, duein part to the timing and mix of the company's ceded reinsurance programs.

McGavicksaid the company expects the insurance segment acquisition expense ratio to moveback in line with the level seen in the second half of 2015 as acquisition expenses even outthrough the rest of 2016.

PaulBrand, chief underwriting officer, said on the call that the company reported anacquisition expense ratio of 14.1%, compared with 8.4% in the first quarter of 2015and 13.9% in the fourth quarter of 2015. He said the majority of the increase isbecause the legacy Catlin Group included a larger share of wholesale specialty business, where the grossacquisition costs are higher and loss ratios are lower than legacy XL business.

Brandechoed McGavick, stating that acquisition expense ratio is expected to reduce modestlyto be more in line with the experience in the third and fourth quarter of 2015 aschanges in the company's reinsurance strategy are fully implemented.

McGavickalso stated that the overall challenging rate environment, as well as the effects, have madeit difficult to model certain things such as the insurance and reinsurance businesssplit for net earned premium. McGavicksaid that when April 2015 is taken into account and Catlin results for that periodare included, the trailing 12-month split is between 68% and 69% for insurance,with the balance being reinsurance. "And that would be the gauge I would lookto use, looking forward for the full year," the CEO added.

In addition,Brand noted that the company has developed plans to improve efficiencies during2016 and began executing those plans in the quarter by selectively exiting 35 positionsas it continues to streamline underwriting capabilities across divisions and regions."While the expense savings from these actions are not reflected in the quarter,they will begin flowing through in subsequent quarters, along with other efficiencyinitiatives that are currently underway," he said.